1Mby1M Deal Radar 2010: i-Jet Media, Silicon Valley, California

i-Jet Media is a social games publisher and social media distribution network. Within the framework of cooperation with social games developers, i-Jet Media examines their games, markets, elaborates on, and adapts games, integrates applications, and provides technical support for users in many world languages.

The company was founded in 2005 by Alexey Kostarev and Dmitry Shubin. Previously, they founded an Internet provider, Medialt, an experience that showed them how profitable the games sector could be. i-Jet Media has offices in Silicon Valley, Luxembourg, Beijing, and several cities in Russia.

During the first phase of growth, the company’s founders used money they had gotten from selling Medialt. They hired 100 programmers to start developing browser games, the first of which was Steel Giants. However, i-Jet Media quickly ran out of money and had to fire 90 percent of the staff. Nevertheless, the company launched two multiplayer games: online strategy Steel Giants, and a PC version of a popular psychological game Maffia New. Maffia New awoke an interest in Rambler, which was among three largest Runet portals. The game gained 500,000 users on Rambler during a couple of years. In 2007, Maffia New was published on Facebook. However, players did not have much to pay for in the game, so i-Jet Media earned only about $30,000 a month. Kostarev moved to the United States for one year to see how the social games market worked. There he agreed with Google to include Maffia New into the project Open Social – API for games on MySpace. Having returned to Russia, he had to make money as a taxi driver. Other employees made some money on the side, too, washing cars and driving taxis. In order to motivate the staff, the owners of the company promised all employees a share in the company when monthly revenue reached $100,000 and then $1 million.

In 2008, the founders left for China, where a social networking boom had started. They signed up on Chinese social networks and played games with the help of Google Translate. They decided to get into virtual farms and formed an agreement with a Chinese developer, Elex Technologies, that had produced the game Happy Harvest. The game was adapted to Russian social networks, translated into Russian, and published on the largest social network in Russia, Vkontakte, in April 2009. i-Jet Media used the MLM strategy: Only those who brought three players or more with them could play. They also tweaked the model and charged players to acquire new virtual land. Happy Harvest collected $20 million in Russia during the eight months of 2009. The success of the game was a turning point, and the company rehired its staff.

In 2010, the management team changed the positioning of the company, and i-Jet Media started entering into cooperation with Russian, Asian, and Western developers and social networks to grow as an international social games distribution network.

According to market analysts Justin Smith and Charles Hudson, the American virtual goods market alone will approach to $1.6 billion in 2010. GP Bullhound estimates the world social games market to increase from $1 billion in 2009 to $3 billion in 2012. i-Jet Media estimates that the Russian social games market will finish the year of 2010 at $40 million–$60 million. To give a sense of the numbers, the German social network VZnet Networks has about 17 million registered users; Russia’s Vkontakte, about 89 million; Russia’s Odnoklassniki, about 15 million; pan-European Netlog, about 70 million; and China’s Renren, about 15 million. The target market is social networks users, and at present, more than 60 million users of 30 social networks play 70 applications published by i-Jet Media. The company has more than 40 partner developers from Russia, the United States (Playdom, Alawar Entertainment, Akella, Drimmi, Evolution, etc.), Europe, and Asia.

The model includes sharing revenue with developers. In addition to helping develop games and distributing them, i-Jet Media does expert examination of games, tunes monetization models, negotiates with social networks over the launch of games, does localization and translation of games into any language needed, and organizes technical support in many languages. The company shares revenue with developers fifty–fifty. In the near future, the more social networks it will cooperate with, the greater developers’ share will be. The average cost of developing one social game in Russia is $100,000. The company publishes at least four games a month on 20 social networks.

The main competitor is Zynga, which i-Jet Media believes manages its product portfolio in a more successful and skilful manner than do other companies. At the same time, i-Jet Media thinks that its distinction and advantage is that its portfolio and the number of game developing groups are potentially much greater than Zynga’s, the reason being that i-Jet Media cooperates with independent developers: it has 40 teams unaffiliated with i-Jet Media, with 5,000 specialists in game development and expects to double this number by the end of 2011. Zynga and other large market players are focused on a single global social network, Facebook. i-Jet Media aims to be present on all social networks, which number more than a thousand. i-Jet Media is also developing its own technological platform, which will permit it to distribute game content not only within the framework of social networks but on any Internet website oriented to socialization (e.g., Web communities).

The 70 games published by i-Jet Media bring in approximately $1 million a month, which puts the company at a $12 million annual revenue run rate. The company is profitable at its current level of development and has been bootstrapped thus far. At the same time, the founders are aware that they need additional investment to buy game developers on some local markets in Latin America, North America, and a few other countries to ensure global growth. In October–November 2010, the founders are going to set up an investment round based on the estimate of the company’s value at $100 million.

The strategic goal of i-Jet Media is to build the largest social media distribution network in the world. Considering the current phase of the market development, Kostarev says it will need to distribute 100 games on 100 social networks with revenue from every product about $2,000 each month. The strategy to accomplish this signing on with more social networks and more developers, and building a more perfect platform for their integration. The goal for the company is to operate with annual revenue of more than $200 million.

Recommended Readings
Starting Successful In The Social Gaming Industry: A Perspective From China
The Fall of Wall Street and The Rise of The Virtual Street
Playdom and i-Jet Media to Publish Games and Battle Piracy in Russia and Europe (from SocialTimes)

This segment is a part in the series : 1Mby1M Deal Radar 2010